In October, some commercial banks increased interest rates on dong deposits by between 0.2 per cent and 0.5 per cent per year, making it the fifth hike since August this year.

DongA Bank in late October announced a 0.5 per cent increase in the rate for numerous term deposits, raising 6 month, 7 month and 8 month deposits to 6 per cent per year. The rates for shorter terms of 3 month, 4 month and 5 month deposits have also been adjusted upwards by 0.2 per cent to 5.2 per cent. This marked the second time the bank had raised its rate since mid-August this year.

After making a 0.2 per cent deposit interest rate hike on October 21, Viet Capital Bank on October 28 also announced a second adjustment for the month, with another increase of 0.2 per cent for numerous term deposits.

With the fifth hike, the dong deposit interest rate offered by commercial banks has increased by a total of some 1 per cent since August this year.

Commercial banks expected the rate increase to help them attract more deposits, especially medium- and long-term deposits, to balance their source of capital and meet medium- and long-term lending demands.

No cause for concern

After the deposit rate increase, businesses feared a possible lending rate hike would occur in the following months.

However, experts said strong liquidity at large banks would make it difficult to increase the lending rate in the coming months.

According to Can Van Luc from BIDV, the deposit interest rate hike is not popular and is seen only in small- and medium-sized banks which are capitalising on the rising deposit sources at the end of the year to enhance their capital mobilisation and to boost their credit growth.

The rates at large banks such as Vietcombank, VietinBank, Agribank and BIDV had remained stable thanks to their strong liquidity, Luc said.

The latest statistics from the State Bank of Viet Nam also showed that the dong mobilisation rates continued to be stable. The rates were commonly at 0.8-1 per cent per year for demand and for terms below 1 month, 4.5-5.4 per cent for terms of 1 to less than 6 months, 5.5-6.5 per cent for terms of 6 months to less than a year, and 6.6-7.2 per cent for terms of longer than a year.

Director of Vietcombank's Thang Long branch Ho Van Tuan also told Tien Phong (Vanguard) newspaper that interest rates for the rest of the year would remain unchanged due to good liquidity.

According to Tuan, his branch, to date, has mobilised more than VND10 trillion (US$446.42 million), while its total outstanding loans amounted to some VND5.3 trillion ($236.6 million).

Vietcombank's lending interest rates are over 10 per cent per year for long-term loans and about 8.5 per cent for short-term loans, according to Tuan.

Tuan said his bank expected to boost credit growth, but it was not easy to find good borrowers at the moment.

The director of an Agribank branch in the capital, who declined to be named, confirmed that banks were trying to boost lending to exporters and importers whose capital demands were rising at the year-end. However, the director admitted that lending was not easy, as this group of customers did not pay much attention to interest rates but to lending procedures and mechanisms.

He was concerned that his branch would have difficulty meeting the annual lending target as it had so far met only 60 per cent of the target.

According to the central bank, the dong lending rates have remained stable. Besides the average rates of 6-7 per cent for short-term and 9-10 per cent per year for medium- and long-term loans for priority fields, State-owned joint-stock commercial banks have also continued offering the rates of 6.8-9 per cent per year for short-term and 9.3-11 per cent for medium- and long-term ordinary loans.

As inflation this year is forecast to rise by only about 2 per cent, the lowest level for the past decade, deputy head of the National Assembly's deputies delegation of HCM City Tran Du Lich affirmed that he would recommend the relevant ministries and bodies cut the lending rate by some 2 per cent per year starting in 2016 to support production and business.

If medium- and long-term lending interest rates remain high at 9-10 per cent per year, local businesses cannot restructure their firms to increase their competitiveness, Lich said. — VNS